Join this session to hear the remarkable journey of how member Tim Foster achieved a successful exit in just three years, compared to the industry norm of 15 years. Discover the innovative strategies and key decisions that enabled Tim’s firm to fast-track its growth and gain valuable insights from the lessons learned from the exit process. Tim will also share what he would do differently next time and provide practical advice and actionable tips for founders who are contemplating an exit. Don’t miss this opportunity to learn from someone who has navigated the exit process successfully in record time.
TRANSCRIPT
Greg Alexander:
Hey, everybody. This is Greg Alexander, founder of Collective 54. And you’re listening to the Proserv Podcast. This show is dedicated to helping founders and owners of boutique professional services firms make more money, make scaling easier, and make an exit achievable. We appreciate you all being here. On today’s episode, we’re going to profile a really fantastic entrepreneur who went from cradle to grave, from starting to exiting a business much faster than most. He’s kind enough to be on the show and share with us specifically what he learned as a result of going through the exit process. Whenever we have access to somebody who has successfully sold a firm, we always want to get them on the show and with our members because these exits are rare, they’re usually private, and we often don’t get a chance to learn from them. So that’s what we’re going to discuss today. With that, let me introduce Tim Foster. Tim, formerly of Maple Street Advisors, why don’t you introduce yourself and the new firm?
Tim Foster:
Sure. Thanks, Greg. Thanks for having me on. So, Tim Foster, I was one of the founding partners in Maple Street Advisors. We went through an acquisition in March of this year by a firm called IGS Investor Group Services, where I am now a managing director helping lead the value creation practice within IGS. So excited to be here and maybe share some sage advice?
Greg Alexander:
Yeah. Well, we’re very fortunate to have you and thank you for being here. So let me jump into question number one, which is what did you learn about the exit process that surprised you?
Tim Foster:
Yeah. So, you know, I come from private equity. So I’ve been around private equity. I’ve seen lots of deals being done over the years, usually from the buy side, right? So this was really my first experience being on the receiving end, being on the selling side of it. And I think what surprised me the most, and again, having seen lots of these transactions, I should have expected it, but it still surprised me, was just how long it took and the complexity. I mean, we didn’t have a very complex business. At least from my perspective, we had no assets, our revenue was pretty normal, right? We had no debt. I mean, we’re running a consulting firm. So in my mind, it was pretty clean, but it was still such a grind to get through the sales process, the amount of requests for the same information from different vendors at the private equity firm. We were acquired by a private equity-backed consulting firm, IGS. So when you’re going through that type of process, there seems to be just an added layer of complexity that they add on in terms of making sure that they’re covering themselves from a transaction standpoint. You hear about deal fatigue and how that can impact the owners, the folks running businesses, CEOs as they’re going through the sales process, and how it can distract them from actually running the business. And I got to witness firsthand that level of frustration with trying to get things moving fast, but always something slowing us down, being put under the spotlight as you’re getting grilled about why did you do it this way? Why did you do it that way? That’s not part of the standard, blah blah blah. So yeah, it was eye-opening. I think I have a lot more empathy for business owners. They go through the sales process and have to deal with multiple potential acquirers all asking for the same information all the time and never really happy with all the stuff that you give them. So that was probably the biggest surprise from my perspective.
Greg Alexander:
Tim, because normally, you’re the person doing the grilling and this time you are getting grilled.
Tim Foster:
Yes, 100 percent.
Greg Alexander:
Life is twisted that way, you know. It’s good that you went through it because now when you’re the griller again, you’re going to have a little bit more empathy for the people that you’re grilling.
Tim Foster:
I absolutely have more empathy, especially as I’m working with portfolio companies and management teams, and talking to them. I’m being brought in to really assess their business and asking them a lot of the same questions. I’m like, why didn’t you do it this way? So, I definitely have a much better perspective from their shoes having gone through this process.
Greg Alexander:
So, how long did it take from the start of the process to when the check hit the bank account?
Tim Foster:
Yeah. So it took probably nine months. I would say, we initiated some conversations. We were not looking to sell, right? Like we weren’t actively marketing ourselves out in the world. We had fortunately been successful with the business for a couple of years, and some of our clients had referred us to some of the private firms that they work with, and that’s how they reached out to us. So they reached out to us and said, hey, we want to learn more about your business. We think there’d be a good fit for what you guys are doing with our company. And so, that was kind of what kicked it off. From my perspective, it was more about, hey, let’s just go through the process. This will be a nice dry run. If we actually ever do go to sell the business, at least we’re familiar with what they’re looking for. We can understand what we need to do from a gap standpoint around our financials or anything else that they’re going to require or request. The biggest thing from my perspective was just getting a real value in the business, right? Because we’ve thrown out valuations. But until somebody actually is willing to write you a check, you don’t really know what your business is worth. So I said, at the worst, at least we’ll figure out what value they’re putting on the business and then what we need to do to grow that. So that’s kind of how the process got started, which was a very casual approach to let’s have conversations, good to know these folks, maybe we’ll sell to them at some point to eventually moving down the path. I would say we got serious in probably October 23, and then we didn’t really close until March 15. So it took a good six months to get through that whole process.
Greg Alexander:
You know, there’s a big learning here for those that are listening. Sometimes people think that if they don’t go through an auction, hire an investment banker, and kiss a lot of frogs, it can go a lot faster. In Tim’s case, they didn’t go through an auction. They were referred, they had a qualified buyer, and it worked out, and it was still nine months. So, just be careful if you’re thinking about exiting a firm. Listen to Tim right now. It takes a long time and it’s heavily distracting. No matter how sleek you think you are, it’s going to take a while to get it done correctly.
Tim Foster:
No,
Greg Alexander:
I.
Tim Foster:
There are a lot of boxes that have to get checked before the people were really checked. So.
Greg Alexander:
Yeah, makes a lot of money, right? I mean, you can understand why they do what they do. Let me ask the next question. So if you were to do it over again, knowing what you now know?
Tim Foster:
Yeah.
Greg Alexander:
Would you do it differently? And if so, how?
Tim Foster:
Yeah, probably. I think I would have taken a more structured approach. I probably would have gone out and interviewed some bankers and maybe hired a banker to run an official process for a couple of reasons. Not necessarily to save time, although, you know, in theory, if you have a banker running a process, there’s a start and end date, right? They’re gonna get you some bids. I think we were a little hamstrung in terms of just, you know, we were having conversations with one potential acquirer. We had tried to start conversations with other potential acquirers, but unfortunately, the timing was not great. If you think back to the end of ’23, right? That was kind of a bloodbath year for a lot of professional services firms. A lot of firms had revenue down, and so potential acquirers for us were a bit timid about going out and doing transactions at that time. Surprisingly enough, most of them came back at the beginning of ’24 and said, “Hey, are you guys still interested in having conversations?” By then, we had already gone down the path with IGS. But I would say, you know, having a banker involved, they can help mitigate all of the requests and streamline the process and give you back more time. They can mediate for you. It’s probably not a bad idea if you’re looking at a sizable exit, right? If there’s a reasonable amount of money that you’re gonna go out and get, it probably makes sense so that you can have more than one pursuer of your business because you’re gonna get a better deal. There’s just no doubt about it. I think it’s just proven, right? You’re gonna get a better deal if you have multiple folks bidding on your business. Private equity firms realize that. And ultimately, I think you’ll benefit from that. So, I don’t think you necessarily need to always hire a banker, but evaluate the opportunity. In this case, I think I would have done a full process with a banker, and it might have turned out a little bit differently. One of the reasons I’m not super regretful about not doing that is that ultimately, I think IGS would have been the right shop for us to end up with anyway. I could have seen running a process and then being acquired by a larger firm or corporation that I don’t think we would have had as much synergy with. Part of the compelling reason for us doing the transaction with IGS, even though I was kind of on the fence to start with, was that culture-wise, it was a great fit. I asked myself, “Hey, would I go work for these folks if I didn’t have to, if they weren’t going to acquire the business and I didn’t have the business anymore?” And the answer would be yes, 100 percent. From a culture standpoint, from a business perspective, and from a value perspective, I thought that us combining with what they already offered was a great business model. That drove me to ultimately decide that it was a good time to do it, and let’s move forward.
Greg Alexander:
Yeah, you know, you raise a really good point, right? Sometimes our members don’t want to hire a banker because they’re cheap. They don’t want to pay the fee. And I get it, you know, it falls out of your pocket and they say, “Well, I already have a buyer. I don’t need one.” Well, the banker does more than just find you a buyer. In many cases, that’s a huge part of what they do, but they also manage the whole process, which makes it easier.
Tim Foster:
Yes.
Greg Alexander:
You know, so something to keep in mind, members, if you’re wondering whether you should hire a banker or not, really think about that because sometimes it’s nice to have somebody help you with the process yourself because it’s very time-consuming. Okay, next question. So if you were to speak directly to members who are thinking about selling their boutique pro server firm right now, now that you’ve gone through it full cycle and your professional experiences having gone through it for the buyers, and now you’ve gone through it as a seller, what are maybe two or three things that you would tell them to start thinking about?
Tim Foster:
Yeah, yeah. And things that I should have started thinking about myself sooner. So, a couple of areas where you certainly don’t want to get tripped up. So I would say make sure you have your accountant and your lawyer talk to each other, right? Make sure you’ve got your P’s and Q’s kind of aligned when you’re thinking about your corporate structure, whether you’re a C corp or an LLC. So that when a transaction comes along, there are tax ramifications on all of those things, right? So you want to make sure you’ve got the right corporate structure and that your legal team and your accounting team are all aligned around that because you don’t want to run into any hiccups late in the process because there’s a problem with something. So that would be my first one. The second one is that with regards to the lawyer, make sure you get a good transactional corporate attorney who understands transactions, not just the guy that filed your paperwork for your LLC, but somebody who does. And hopefully, if you’re being moved by firms that are backed by private equity firms, then make sure that you have a good private equity attorney. Like somebody who has gone through those transactions with PE firms because they will stack the deck against you from a contract standpoint if they can. And you don’t want any landmines or anything surprising you after you close the deal because you’re now locked up into a six-year non-compete. So make sure you have a really good corporate attorney that understands private equity deals and how private equity investors are thinking. Because the other thing that will do is it will speed up the process. One of the things that can certainly drag out any transaction is the whole legal process. You can agree on the price and everything else, great. Then you get to the actual legal contract and that could take three months to get through depending on your lawyers. And if your lawyers focus on things that are not really relevant. And I’ve seen that in a number of situations where you have a private firm and you’re dealing with a corporate attorney who’s not familiar with private equity terms and typical conditions in private equity deals. And they can just bog down the transaction significantly. So that would be the other thing. And then, I think finally depending on your structure, make sure your founders are aligned with you, right? Like if you’ve got co-founders or other equity holders in your business, make sure you guys are all on the same page when it comes to an exit. And I would even have the conversation before you go down the path of like, what are you looking to get out of the business, right? What kind of exit would satisfy everybody’s concerns because you don’t want to go through the process and then have a fractured relationship or a conflict where some folks on the team want to do the deal and some folks don’t because ultimately, that’s not going to bode well for you getting acquired. Because again, at the end of the day, a professional services firm is the people, right? That is what you’re selling, yourself and your team. And if that team is not all on the same page, you’re not going to have a really good outcome.
Greg Alexander:
You know, I will tell you that I’ve got a war story to share. So, you know, when I had my firm, I had partners and when we sold, everybody said, yeah, we’re okay. We’re good with this and we did the deal. A year later, everybody had buyer’s remorse and they forgot that we had agreed on this. And like an idiot, I didn’t really document it. They were verbal conversations and I’m like, wait a minute. You’re all pissed off at me now. We had this conversation and they remembered the conversation differently than I did.
Tim Foster:
100 percent accurate, you know, make sure that consensus among the partnership is there. But I would also make sure that there’s a paper trail of what everybody agreed to upfront. One last question for you, Tim, because this has been great, is that you are a young firm and grew quickly which is both awesome. You know, we tell people it takes 15 years. I think you’ve got it done in like three or four years. Why did you decide to pull the trigger so fast?
Tim Foster:
Yeah. So, you know, I think part of it was having consensus. Like when we started the firm back in 2019-2020, both myself and my co-founder said, hey, let’s build this for five years and then sell it, right? So there was no lifestyle business; we always had the same goal in mind which was we’re gonna get an exit. Let’s grow this as fast as we can and then try to sell. So, I think with that in mind, it came a little earlier than we expected quite frankly, but we were always going to sell the business. So, from that perspective, it wasn’t shocking, and I think we had had success and so it made sense. And then in terms of just doing it now, I felt that there was a good opportunity to obviously take some chips off the table, right? Like, you know, a bird in the hand is worth two in the bush. So, hey, lots of things can happen like my co-founder could drop dead of a heart attack tomorrow. And then I’m kind of screwed, right? So, you know, let’s take some money off the table. We still have equity. We rolled over some equity into the business because we have confidence that the firm is going to do really well with us there and we’ll get a bite of the apple which is important. And then I think it made sense for us just to continue to scale the business, right? We had done really well. But quite frankly, from my perspective, I was running HR, finance, accounting, and still trying to do sales and some delivery work. It was just a bit overwhelming, right? And so, I think the ability to join up with a firm that offered a larger platform, we could take a lot of that stuff that quite frankly I didn’t enjoy as much off my plate, was pretty appealing and have a little nest egg so that I don’t have to worry too much about my kids’ college education and everything else.
Greg Alexander:
Yeah. Well, it sounds like you made a lot of sense. It sounds like you found, the perfect partner that was, they were really good at the things that you didn’t enjoy doing. And, you know, one one plus one is going to equal 35 here, which is really good. All right. So a couple of calls to action for listeners. So if you’re listening to this and you want to meet people like Tim and learn from him, consider joining, collecting 54, you can go to our website and fill out an application, someone get in contact with you from members that are listening to this. You know, we’re gonna have a private Q and a with Tim and you’ll be able to ask more specific questions that’s an hour in length. We try to keep these podcasts much shorter than that. So please look for the invitation for that. And if you’re not ready for either of those two things, you just want to consume some more content at, point you towards my book. It’s called the boutique, how to start scale and sell a professional services firm authored by yours. Truly. You can find that on amazon. But Tim, on behalf of the entire membership, we’re sad to see you go because you’ve exit it. So you’ve graduated, but you are a, great member. You’re always generous with your time in giving back to our members. And today is an example of that. So we’re so very happy for you. Congratulations on a great success. So.
Tim Foster:
Thanks Greg. I appreciate it. And, and thanks for starting this, you know, 54. I think it’s a great resource, for owners that are trying to figure out, you know, their path through life, and some of the obstacles that couldn’t come up. And I certainly found it helpful while, I was a member.
Greg Alexander:
Thank you for saying that. Okay, take care, everybody. Thanks.
Note: This transcript was generated by Gong.